“And then there’s Japan, the ultimate land of contradictions.”
-Peter Zeihan
You like stocks, right? You’re long Japanese Stocks, in size, right? Everyone is, aren’t they?
Uh, no. And everyone doesn’t love Commodities, as an Asset Class, or Energy Stocks (XLE) either. But wow is there a lot of Full Investing Cycle #process “value” in all of these under-owned long positions.
The aforementioned quote comes of a great book Zeihan recently published called DisUnited Nations. In Chapter 5 he calls Japan the “Late Bloomer.” Since it’s the “most resource-poor of the world’s major powers” Japan needs lots of Commodities too!
Back to the Global Macro Grind…
We’re not just trying to help you think differently about investing, we’re trying really hard to help you position differently than the growing community of “investors” who are long of the same stocks.
Preserving and protecting your hard earned wealth obviously isn’t just about “stocks.” It’s definitely not all about “growth” vs. “value” stocks either. It’s about compounding returns, across asset classes, where falling volatility perpetuates those returns.
Sometimes (i.e. when the US and world is in #Quad4), the volatility of major asset classes like Commodities and Emerging markets makes those asset classes un-investable.
*See what Oil Volatility (OVX) of 325 did to Energy “investors” during #Quad4 of 2020 for details.
Other times, when Emergent Properties (like Down Dollar + Inflation Accelerating) undergo Bullish @Hedgeye TREND Phase Transitions, a new Regime of Volatility perpetuates alpha in Commodities and Emerging Markets.
That’s not new this morning. We started making that Asset Allocation pivot in June of 2020.
What is new this morning is a broadening of differentiated Global Macro returns that have nothing to do with what the umpteenth analyst thinks about his/her MSFT and APPL stock or the unwind of their PM’s massive Call Spreads in both.
What’s Legit Value this morning that consensus does not own?
A) Japanese Stocks (EWJ) +1.8% overnight to their highest level since 1991
B) Taiwanese Stocks (EWT) +1.4% overnight to higher-highs for 2020 as well
C) Commodities (CRB Index) ramping to new Cycle Highs with Oil inflating another +3.3%
D) Energy Stocks (XLE) ramped another +3.2% yesterday with Consumer Discretionary (XLY) -0.4%
E) Corn (CORN) and Soy (SOYB) inflating to new Cycle Highs as well this morning
Why don’t they own these things? Is it a marketing problem? Who’s marketing the narrative that the Fed & Fiscal are perpetuating asset inflation via a Burning of The Buck and that The People are going to have to literally eat it?
Eat it? Yes big time elitesters. The People gotta eat. They need to have a roof over their children’s heads before they hit the button on moarrr AMZN prime shipments (that they don’t get) too.
What if they have no arable land to farm their own food? Did you know that of “Japan’s 127 million people, 125 million of them live on scraps of land that are collectively smaller than West Virginia?” -Zeihan, pg 105
Or have you been listening to “global investors” who know nothing about Japan or its people?
I’ll tell you another thing about the Japanese People: their demographics really suck. But their people are very happy about an appreciating Japanese Yen. Yes, think outside the box about that for a second – if you’re paid in Yen, that is…
The other thing the Japanese have of tremendous “value” is that they’ve invested, bigly, in automation in order to offset their demographic problems. Especially as Asia’s demand re-accelerates with its largest economies in Quads 1& 2, that’s bigly too.
On another important note this morning…
In addition to being thankful and blessed with both our health & wealth this morning, I wanted to say thank you to our bravest. Whether you are an American or part of my homeland and the Commonwealth who is celebrating Remembrance Day today, this is always one of the most important days of the year to be thankful for both our veterans and those who gave their lives for our liberty and freedom. These are some of the assets in our lives that have the most value. -KM
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.74-0.99% (neutral)
SPX 3 (bullish)
RUT 1 (bullish)
Tech (XLK) 108.32-124.65 (neutral)
Energy (XLE) 26.05-36.32 (bullish)
Shanghai Comp 3 (bullish)
Nikkei 238 (bullish)
VIX 23.27-42.14 (neutral)
USD 92.00-93.43(bearish)
USD/YEN 103.20-105.84 (bearish)
Oil (WTI) 36.32-43.01 (bullish)
Nat Gas 2.71-3.43 (bullish)
Gold 1 (neutral)
Copper 3.03-3.19 (bullish)
MSFT 195-224 (neutral)
AAPL 106-121 (neutral)
AMZN 2 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
